Walgreens Acquires Rite Aid in $17.2B Mega-Merger

Walgreens Boots Alliance announced plans to buy Rite Aid Corp. for $9 per share, which values Rite Aid at $9.4 billion, which Walgreens has agreed to pay in cash. Including net debt, the deal is valued at $17.2 billion.

“Walgreens Boots Alliance will provide to Rite Aid its global expertise and resources to accelerate the delivery of integrated frontline care, and to offer innovative solutions for providers, payers, and other entities in the US healthcare system,” Walgreens CEO Stefano Pessina said in a statement.

The purchase price represents a premium of 48 percent to the closing price per share the day before the agreement was signed.

The combination of Walgreens Boots Alliance and Rite Aid creates a further opportunity to deliver a high-quality retail pharmacy choice for U.S. consumers and once the acquisition closes, Walgreens plans to transform Rite Aid’s stores to better meet consumer needs.

“Joining together with Walgreens Boots Alliance will enhance our ability to meet the health and wellness needs of Rite Aid’s customers while also delivering significant value to our shareholders,” said Rite Aid Chairman and CEO John Standley.

The boards of directors of both companies have approved the transaction, which is subject to approval by the holders of Rite Aid’s common stock, the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions.

Citi acted as Rite Aid’s exclusive financial adviser, with Skadden, Arps, Slate, Meagher & Flom LLP acting as its legal counsel on transaction legal matters and Jones Day acting as its legal counsel on antitrust regulatory matters.

UBS Investment Bank acted as Walgreens Boots Alliance’s financial adviser and provided a fairness opinion to the board of directors of Walgreens Boots Alliance, with Simpson Thacher & Bartlett LLP acting as its legal counsel on transaction legal matters and Weil, Gotshal & Manges LLP acting as its legal counsel on antitrust regulatory matters. UBS Investment Bank will be the sole arranger on the bridge financing to Walgreens Boots Alliance. Walgreens Boots Alliance expects to finance the transaction through a combination of existing cash, assumption of existing Rite Aid debt and issuance of new debt.

Upon completion of the merger, Rite Aid will be a wholly owned subsidiary of Walgreens Boots Alliance, and is expected to initially operate under its existing brand name. Additionally, Walgreens Boots Alliance expects to realize synergies in excess of $1 billion. The transaction is expected to close in the second half of calendar 2016.

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